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Audit Committee

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USG Corporation

Charter of the Audit Committee

Corporate Authorization and Purpose

The Audit Committee is one of the standing committees of the Board of Directors specified under Article IV, Section 1 of the Corporation's by-laws. Such Committee shall have ongoing responsibilities to assist the Board of Directors in monitoring the integrity of the financial statements of the Corporation, the Corporation’s compliance with legal and regulatory requirements, the independence, qualifications and performance of the Corporation's independent auditors and the performance of the Corporation’s internal audit function. The Audit Committee additionally shall select and employ on behalf of the Corporation, and approve the fees of, a firm of independent registered public accountants whose duty shall be to audit the consolidated financial statements and internal control over financial reporting of the Corporation and its subsidiaries and affiliates for the fiscal year for which it is appointed, and which firm shall ultimately be accountable to the Audit Committee and the Board of Directors. The Audit Committee periodically shall report and make appropriate recommendations to the Board of Directors.

Organization

The Audit Committee shall have at least three members comprised solely of independent directors (as defined in the applicable rules of the Securities and Exchange Commission (SEC) and the New York Stock Exchange (NYSE)). The members of the Audit Committee shall also satisfy any financial literacy requirements of the NYSE, as such qualification is interpreted by the Board of Directors in its business judgment, and at least one member (who may also serve as an “audit committee financial expert”) must have accounting or related financial management expertise, as such qualification is interpreted by the Board of Directors in its business judgment. The members of the Audit Committee shall be appointed, and may be removed with or without cause, by the Board upon the recommendation of the Governance Committee, or otherwise in accordance with the Corporation’s by-laws. A Chair shall be designated by the Board from among the members of the Audit Committee. Members shall serve at the pleasure of the Board for such term or terms as the Board shall determine. It shall be the goal of the Corporation that at least one member of the Audit Committee shall in the judgment of the Board of Directors be an “audit committee financial expert” in accordance with the rules and regulations of the SEC. A member of the Audit Committee may not simultaneously serve on more than three public company audit committees, including the Corporation’s Audit Committee, unless the Board determines that such simultaneous service would not impair the ability of such director to effectively serve on the Audit Committee.

The Audit Committee shall meet at least four times each year, or more frequently as circumstances dictate. To foster open communication, the Audit Committee shall meet regularly with management and the internal audit staff and the independent registered public accountants in separate sessions. Meetings may be held in person or by telephone. Each Audit Committee member shall participate in the annual evaluation of the Audit Committee's performance.

The Audit Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities, and it has direct access to the independent registered public accountants as well as anyone in the Corporation. The Audit Committee may, in its sole discretion and at the Corporation's expense, retain independent legal, accounting or other consultants or experts it deems necessary in the performance of its duties and without having to seek the approval of the Board, and may request any officer or employee of the Corporation or its outside counsel or independent auditor to meet with it, individually or jointly, or any of its consultants or experts. The Corporation shall provide appropriate funding, as determined by the Audit Committee, for payment of (1) compensation to the independent registered public accountants for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Corporation, (2) compensation to any legal or other advisors or consultants employed by the Audit Committee and (3) ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.

While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or general investigations, to determine that the Corporation's financial statements are complete and accurate and are in accordance with generally accepted accounting principles or to assure compliance with laws and regulations and the Corporation’s compliance policies. These are the responsibility of management and, with respect to audit and financial statement matters, the independent registered public accountants. The Audit Committee does, however, act for the Board of Directors in fulfilling the Board’s duty to assure itself that the Corporation has in place information and reporting systems that are reasonably designed to (1) provide the information necessary for the proper preparation and issuance of the Corporation’s financial statements and (2) comply with laws and other requirements regulating financial reporting and disclosure.

Responsibilities And Duties

As its responsibilities and duties, the Audit Committee shall:

Review Procedures

  1. Review and reassess the adequacy of this Charter at least annually. Submit this Charter to the Board for approval and have the document published in accordance with regulations promulgated by the SEC and NYSE.
  2. Review the Corporation’s annual audited financial statements and quarterly financial statements prior to filing with the SEC or distribution to stockholders and the public. Review should include discussion with management and independent registered public accountants of significant issues regarding accounting principles, practices and judgments, including the Corporation’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Based on review and discussions, make a recommendation to the Board whether the Corporation’s annual financial statements should be filed with the SEC. Discuss any significant changes to the Corporation’s accounting principles and any items required to be communicated by the independent public accountants in accordance with Public Company Accounting Oversight Board Auditing Standards 1301, Communications with Audit Committees (AS 1301), and Rule 2-07 of the SEC’s Regulation S-X.
  3. Discuss the Corporation’s earnings press releases generally, including the use of “pro forma” or “adjusted” non-GAAP presentations, as well as financial information and earnings guidance provided to analysts and ratings agencies.
Independent Registered Public Accountants
  1. Directly appoint and retain the independent registered public accountants, approve engagement fees and terms and pre-approve all permissible non-audit engagements with the independent registered public accountants (including providing comfort letters in connection with securities underwritings). Evaluate the performance of the independent registered public accountants and, if so determined by the Audit Committee, replace the independent registered public accountants. Assure the rotation of members of the audit team as required by law. The Audit Committee may consult with management, but shall not delegate these responsibilities.
  2. On an annual basis, require the independent registered public accountants to summarize audit and non-audit services fees and submit a formal written statement disclosing all relationships between the independent registered public accountants and the Corporation in accordance with then-current independence rules. Review and discuss with the independent registered public accountants all significant relationships they have with the Corporation that could impair their independence.
  3. Review the independent registered public accountants’ audit plan. Discuss scope, staffing, locations, reliance upon management and general audit approach. Review with the independent registered public accountants any problems or difficulties they may have encountered in the conduct of the audit and resolve any disagreements between the independent registered public accountants and management regarding financial reporting.
  4. Establish objective policies for the Corporation’s hiring of employees or former employees of the Corporation's independent registered public accountants with due regard for the continuing independence of such independent registered public accountants.
  5. At least annually, obtain and review a report by the independent registered public accountants describing their internal quality-control procedures and all material issues raised by the most recent internal quality-control review or peer review or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and all steps to deal with such issues.
Financial Reporting Process

 

  1. Prior to filing the annual Form10-K, discuss the results of the audit with the independent registered public accountants. Discuss matters required to be communicated to Audit Committees in accordance with AS 1301 and Rule 2-07 of the SEC’s Regulation S-X, including such things as management judgments and accounting estimates, significant audit adjustments, disagreements with management and difficulties encountered in performing the audit.
  2. Review analyses prepared by management and/or the independent registered public accountants setting forth significant financial reporting issues and judgments made in connection with the preparation of the Corporation’s financial statements. Inquire as to the independent registered public accountants’ views about whether management’s choices of accounting principles are appropriate from the perspective of income, asset and liability recognition, and whether those principles are common practices or minority practices.
  3. In consultation with management and the independent registered public accountants, consider the integrity of the Corporation’s financial reporting processes and controls, both external and internal. Discuss significant financial reporting risk exposures and the steps management has taken to monitor, control and report such exposures, including the Corporation’s risk assessment and risk management policies. Review significant findings prepared by the independent registered public accountants together with management’s responses, including the status of previous recommendations.
  4. Review (a) major issues regarding accounting principles and financial statement presentations, including any significant changes in the Corporation’s selection or application of accounting principles; (b) the accounting treatment accorded significant transactions; (c) any significant accounting issues, including any second opinions sought by management on accounting issues; (d) the development, selection and disclosure of critical accounting estimates and analyses of the effects of alternative GAAP methods, regulatory and accounting initiatives, and off-balance sheet structures on the financial statements of the Corporation; and (e) the Corporation’s use of reserves and accruals, as reported by management and the independent registered public accountants.

Internal Controls and Legal Compliance

  1. Review the internal audit plan, changes in plan, activities, organizational structure, budget, staffing and qualifications of the internal audit group, as needed. Review significant matters reported by the internal audit department, together with management’s response and follow-up to these reports.
  2. Evaluate whether management has established the appropriate culture by communicating the importance of internal controls and is ensuring that all individuals possess an understanding of their roles and responsibilities.
  3. Consider and review with management, the internal audit department and the independent registered public accountants the effectiveness or weakness of the Corporation’s internal controls. Develop in consultation with management a timetable for implementing recommendations to correct identified weaknesses.
  4. Review the coordination between the independent registered public accountants and internal auditors; the risk assessment processes, scopes and procedures of the Corporation’s internal audit plan; whether such risk assessment processes, scopes and procedures are adequate to attain the objectives determined by the Corporation’s management and approved by the Audit Committee; and the composition of the Corporation’s internal audit staff.
  5. Establish and maintain procedures for (a) the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal controls or auditing matters and (b) the confidential, anonymous submission by Corporation employees of concerns with questionable accounting or auditing matters.
  6. Obtain from the independent registered public accountants assurance that there have been no audit discoveries requiring responses under Section 10A Audit Requirements of the Securities Exchange Act of 1934.
  7. Request and receive reports on the design and implementation of internal controls, discuss significant changes in internal controls and address any known weaknesses.

Miscellaneous

  1. Annually prepare and cause to be filed in the Corporation’s annual proxy statement a report to stockholders as required by the SEC.
  2. The Audit Committee may perform any other activities consistent with this Charter, the Corporation’s by-laws and governing law, as the Audit Committee deems appropriate or necessary.
  3. The Audit Committee may, in its discretion, delegate specific responsibilities and duties to any subcommittee it shall name or to its Chair.

 

Jose Armario William H. Hernandez Gretchen R. Haggerty Thomas A. Burke
  • Member
  • Chair
  • Financial Expert
  • Independent Director

Copyright West LLC. Minimum 15 minutes delayed.

IR Contact

William Madsen
Senior Director, Investor Relations
Phone: 312-436-5349
E-mail: investorrelations@usg.com
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